- Utility seeks future competitors coming from outside energy
- Sustainability chief sees bankruptcy for one-third of industry
How does Italy’s biggest utility cope when it realizes it’s on course to hit a technology-shaped iceberg that threatens to chip away customers? Does it hope the problem will disappear, or try to change course?
Ernesto Ciorra has been hired by Enel SpA to avert catastrophe. The head of Enel’s innovation and sustainability unit, Ciorra wants to create a company that adapts quickly to both changes in consumer behavior and the shift toward cleaner sources of power -- a challenge shared by most of its peers, including RWE AG and EON SE of Germany and big U.S. utilities such as Duke Energy Corp.
“If we don’t innovate, we’ll go bankrupt because unfortunately this sector has never experienced real disruption,” Ciorra said in an interview in London. “When this sector does experience real disruption, at least one-third of the existing big companies in this sector will close.”
The dramatic rise in rooftop solar panels and wind turbines that can be installed quickly and increasingly cheaply, along with the predicted growth of battery storage and smart meters that can be controlled by mobile phones is creating an unstoppable shift in people moving off the traditional electric grid. They won’t rely on big utilities for their power.
That is the threat that keeps Ciorra up at night, instead of the plunging cost of oil and its potential to slow the growth of renewables.
“If you manage a company you have to take care of oil costs, but if you want to forget the present, you must not be limited by the existing reality,” the executive said of the oil price, arguing that 42 percent of Enel’s energy already comes from renewables. He said the price of oil might eventually be as relevant as the cost of Smarties candy or popcorn if technology transforms the energy business.
Ciorra may sometimes sound more like a philosopher than a businessman, but many industry experts agree they don’t know exactly how the utilities will change over the coming decades. They do know shift will come rapidly, requiring a quick response. The alternative is to risk the fate of companies such as Eastman Kodak Co., which failed to predict how digital cameras would replace film, or taxi drivers battling the rise of Uber Technologies Inc.
Already startups are upending the utility business model. Open Utility, a London-based company, partnered with Good Energy Group Plc to create a digital platform that lets people buy and sell energy to each other directly.
Nest Labs, the digital thermostat maker bought by Google Inc. for $3.2 billion in 2014, already has more than 10,000 developers working on top of their system to provide products and services to consumers, according to Richard Miller, deputy director for industry, at the British government agency Innovate UK.
“Slowly and stealthily, this kind of technology is making a radical difference,” Miller said at a conference in London this week.
Enel’s future competitors may not be in the energy industry. Instead, technology companies and even phone providers may hive off its customers.
Ciorra’s job is to find them and figure out how Enel can use their inventions. His team screened 1,200 startups and picked as many as 25 last year, which were given help and funding to further develop their technology. Enel doesn’t demand exclusive rights to products. Instead, it asks to be the first user.
“Money is important, but money runs out unless you have somebody helping you get to market,” said Karim el Malki, chief executive and founder of Athonet srl, a startup based outside Verona, Italy, that’s working with Enel.
Ciarro was in London this week looking for startups. Enel also began a six-month startup program in Israel Wednesday, and is planning an accelerator program at the University of California at Berkeley.
It’s a concept he dubs “reverse innovation.” Instead of developing ideas at home and exporting them, he wants to visit other countries, identify their energy problems and then create the solutions.
“The citizenship of an idea is not the citizenship of a country,” Ciarro said. “It is the citizenship of the world.”